Berkshire’s Recent Fund?

Am looking at recruiting here but am somewhat confused at their Fund X. Read they had raised $2.5B and had a staple process but no news on the fund in the past few months.
 

Did it hit its target ($6.5B) // if not should this be a red flag for recruiting to Berkshire?

Comments (12)

  • Associate 2 in PE - LBOs
Jun 18, 2022 - 12:59pm

Returns were fine but pretty sure they still lagged their peers. Around the time they initially went to market, I think their two recent funds were Q3. Missed their fund target by about 10% (ended up with $5.8B). I have a hard time believing this can be pinned solely on the fundraising team given their past track record, pedigree, prestige, etc. but perhaps that's part of the issue. Plenty of other UMM funds with recent fundraises (e.g., NMC, GTCR, MDP) have had no trouble raising money.

Wouldn't call it a red flag. Still a great place to end up at. Would be curious to see where they're at in the next 5 years. They went from $4.5B in 2011 to $5.5B in 2016 to $5.8B last year. Maybe an intentional decision to scale slowly and stay a UMM player but I would have thought they would have scaled quicker by now.

Jun 19, 2022 - 10:54pm
RedWhiteAndBlue, what's your opinion? Comment below:

As noted above, the returns lagged peers. Berkshire is more value oriented and tends to invest in old-line industries, so they didn't have the growth/software-driven performance that most peers experienced. A $6bn fund is still impressive, but generally, most GPs were growing their fund size 20-50% (or more in some cases) over the past few years. It's not a red flag in the short term, but longer term, the firm will need to improve performance or will likely just continue to bleed AUM.

  • 1
  • Analyst 2 in IB-M&A
Jun 19, 2022 - 11:37pm

How much do people think their comp set focus on tech has to do with this? If you consider the peer group as funds like NMC, Genstar, Golden Gate, etc, every one of those funds does tons of software deals and would imagine a big portion of returns are just from riding the software wave. Berkshire on the other hand is much more old-school industries (believe industrials and consumer are their best groups), so would imagine they'll be a lot better positioned in this downtown vs somewhere like Genstar that's been dumping money into tech? Curious what people think here but pretty clear Berkshire is much less indexed to tech vs pretty much any fund of their size

  • Prospect in PE - Growth
Jun 20, 2022 - 9:49pm

definitely wondering the same thing. it seems like a lot of people lose their minds over software/tech PE firms and write off firms whose bread & butter is in other areas. Are the the tech focused funds going to get caught with their pants down over the next coupe years when tech valuations level off? It seems inevitable, but I also don't know all that much and would welcome the input from those in industry already. 

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  • Analyst 2 in IB-M&A
Jun 20, 2022 - 11:31pm

In TMT group now and interviewed at a bunch of tech PE funds so here's my take, but have not actually worked in PE yet.

I think we'll see lots of tiger global-esque blow ups over the next 2 years. Go look at the HF forum - everyone laughing at the guys blindly dumping money into tech that blew up and cheering on value/macro/every other strategy that previously got killed.

PE going to have the exact same cycle, it's just not showing up yet because funds are avoiding marking down anything. I personally think non-tech investors are going to have a field day and tech funds are going to have a very tough time.

Basically every sell-side process I've been on over the last year has been the same story - PE firm bought a software business for a "reasonable" price (maybe ~5x revenue), cobbled together 15-20% growth with a bunch of acquisitions, and sold it for 12x revenue. In all of these cases a modest return is coming from growth but the vast majority of the returns are from multiple expansion, and I just don't think that trend is sustainable.

Plenty of top sponsors thst everyone here applauds as being "super smart investor" have paid what works out to be 50x+ EBITDA multiples on software businesses that aren't even growing that fast. Basically no way to build an LBO model that shows any decent returns without projecting a ton of acquisitions and absurd growth, or just slapping an insane exit multiple. Will be very interesting to see how this all plays out.

  • Analyst 1 in IB-M&A
Jun 21, 2022 - 2:24am

image-20220621021654-1

Summarized some of the sector names for simplicity but here is some data I pulled from fundraises since COVID had started. Few notable firms in market so I kept them at the bottom. Missing Veritas (has been crushing it, didn't see where they ended up on last fund) and probably a few others. While I think the tech angle has definitely played into it, it's worth noting that all of these firms (other than Roark) invest in multiple sectors and a lot of prominent funds invest in industrials / business services. Berkshire does do some tech investing although perhaps not at the same rate as some of the others.

  • Associate 2 in PE - LBOs
Jun 22, 2022 - 2:55pm

Clearlake and Genstar have been growing like weeds. Interesting to see 40%+ growth in fund size for GTCR, NMC, Oak Hill, and THL as well. Lindsay Goldberg and MDP invest a fair amount in industrials and they had lower fund size growth as well. CD&R does a good bit of industrials as well but they've grown quite a bit. Planning to raise $20B following a $16B fundraise (60% larger than prior fund).

Good work.

  • Analyst 2 in IB-M&A
Jun 20, 2022 - 6:37pm

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